The inspector general at the Department of Housing and Urban Development has closed, without any enforcement action, an investigation into whether there was improper political influence at the agency that regulates Fannie Mae.
"From our perspective, the matter is closed," Helen Albert, deputy inspector general for management and policy, said yesterday. An edited copy of the report on the Office of Federal Housing Enterprise Oversight is being prepared for release.
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SEC Takes Fannie Mae Investigation To Next Level (The Washington Post, Oct 15, 2004)
Report on Fannie Mae Regulator a Secret (The Washington Post, Oct 14, 2004)
Justice Asks Fannie to Save Documents on Accounting (The Washington Post, Oct 13, 2004)
HUD Secretary Alphonso Jackson reviewed the report andreturned it to the inspector general "with a determination that no action was warranted," HUD spokesman Douglas P. Duvall said.
Sen. Christopher S. Bond (R-Mo.) asked the inspector general months ago to assess whether OFHEO's public statements about an ongoing examination of Fannie Mae's accounting "reflect any inappropriate or undue political influence in the examination process." Bond criticized the regulators for saying in March that their review could lead to a correction of Fannie Mae's past financial results. He said OFHEO was apparently trying to influence the drafting of legislation to create a new regulator.
The agency has since issued a report alleging that Fannie Mae tolerated weak internal controls and deliberately violated accounting rules. If the Securities and Exchange Commission agrees with that assessment, Fannie Mae could be required to retroactively book $9 billion of unreported losses, the company said this week.
Rep. Barney Frank (D-Mass.), who has seen the inspector general's report, has said it "raises very serious issues" about the role the agency played and "has major public policy implications." OFHEO spokesman Corinne Russell declined to comment, saying the agency has not seen the report.